Obamacare Aims to Close Medicare 'Doughnut Hole'

Shrinking Since 2010, It Will Close in 2020

There's a Medicare prescription-drug coverage abyss that is playfully referred to as the "doughnut hole," though there is nothing sweet or amusing about it.

But thanks to the Affordable Care Act, which had a rocky launch last week, Medicare beneficiaries will see that gap shrink again in 2014 and in each year until 2020, according to Medicare.gov.

The doughnut hole is the temporary limit on what Medicare drug plans pay after certain dollar thresholds for drugs have been met.

The year starts with monthly Part D premiums and a $310 deductible. You pay 100% of drug costs until hitting the deductible. Then, out-of-pocket costs—consider those copays—drop to 25% of the price of your medications. The plan pays the rest until you reach a ceiling of $2,850 in combined payments by you and the plan.

That is when you fall into the murky hole, which has forced some recipients to choose between meds and paying the rent or buying groceries. Before the ACA, better known as Obamacare, you would have to cough up the entire drug cost until reaching the yearly out-of-pocket spending limit of $4,550.

Since 2010, the tab on your doughnut-hole drugs has dropped through steady discounts. Next year, expect to pay 47.5% of the price of brand-name drugs and 72% of the tab for generic drugs. By 2020, Obamacare will declare the doughnut hole closed and you will continue to cover just 25% of both brand-name and generic drug costs.

ENLARGE

Clare Mallison

Q: I'm still working full time, soon to be 70, and the only insurance I have is with the Veterans Administration. Will I be forced to purchase additional insurance in addition to using VA benefits? So far I've been pleased with the way I receive my medication and treatments with the VA.

— R. Skorick La Junta, Colo.

A: As with Medicare, you don't need to lift a finger. If you haven't already, you will receive a notice from the VA explaining this. All of the VA plans—veterans' health care, the Civilian Health and Medical program known as ChampVA, and the spina bifida health-care program—meet the standards, and then some, of Obamacare. There are no enrollment fees, no monthly premiums or deductibles, and most veterans don't have to pay out-of-pocket costs. But if you feel you need extra coverage, you can turn to the insurance marketplace.

Q: I have desperately tried to find an answer to a question that affects my parents relative to Obamacare and have received contradictory answers from healthcare.gov and the local "navigator."

I am a U.S. citizen living in Texas and my parents have had a green card for a little over two years and live with me. My dad is 80 and my mom is 76. Since they haven't been in the U.S. for five years yet, they don't qualify for Medicaid or any component of Medicare.

The navigator tells me they won't be able to buy coverage through Obamacare because they are over 65.

Healthcare.gov says they have no such restriction and they should be able to buy.

Which is correct?

— Rita C.Houston

A: Healthcare.gov is. (Don't blame the navigators. They've only had about 20 hours of training and this is still new to them, too.) Because your parents have green cards, they are considered lawful residents who, like most people living in the U.S., can get in on the marketplace no matter what age if they aren't eligible for Medicare or Medicaid.

The same is true for those with worker and student visas. Illegal immigrants are another story. For them, no can do.

Check out the immigration statuses that qualify for marketplace coverage at healthcare.gov, which is where you should start shopping for the best plans for your parents. Healthcare.gov also carries a hefty directory of private and nonprofit organizations that can help.

If you've had trouble accessing the sites, wait a couple of weeks for things to settle down.

Q: I will be turning 65 in June 2014. At this time I have no health insurance but will be applying for Medicare three months before my birthday. Will I get a penalty for not having insurance from Jan. 1 to June 2014?

— Sue W. Monterey, Tenn.

A: That is a big fat "maybe." As the law reads, yes, you will get socked with a fine. For 2014, the fine will be $95 or 1% of your total income, whichever is greater.

While there is no official word on this, many health-care experts believe that the complexity of putting the 900-plus-page act into law will lead to loopholes for fines the first year.

Don't count on it, though. You also should not be counting on an accident- or illness-free period between now and next June.

I've got one of those grown children who graduated college and is marginally employed. This 24 year old is currently covered on my privately purchased insurance. If I drop her from coverage, presumably my premiums go down. If she makes $15,000 is year and gets $15,000 from me will Obamacare pay for her insurance.

This Wall St Journal article is very inaccurate. Do not form any opinions about Part D based on this article.

Especially -- if you are on Medicare -- do not make any Part D decisions based on this article. If you are at all unclear about how Part D works for you (95% of us seniors who take Part D have no problem figuring it out despite all the Democratic propaganda that we are stupid Obama haters that are mooching off other taxpayers -- underline other), call your local senior center.

The "donut hole" was and is exactly what its says it is a hole, designed and supported by Big PhRMA to keep the government paying for expensive brand drugs, made twice as expensive here by the 1987 Reimportation Act than in socialized medicine countries. Obama said he would rescind that act and nobody here would have to pay twice as much but instead made a $80 billion deal with PhRMA to get their support for Obama Care.

But there aren't many brand drugs still on patent as 95% of dispensed drugs are generic, most made in India or China and who knows if the FDA tests them, GAO says they don't. So the only "expensive" brand drugs are "biologics" which are advertised heavily on TV and cost hundreds of thousands of dollars which were also included in the Obama/PhRMA deal.

Bad news is they'll take the money only out of Medicare and Medicaid. Good news is these drugs are available in all others countries for 50% less, unless they are generic which would be considerably less; except in Canada where they are only 30% less.

Remember those buses full of Medicare recipients driving to Canada to save 30 cents on the dollar on brand drugs, which caused Medicare Modernization Act. They are all now generic; except ones like Viagra which now costs $15 a pill here, or can be bought over the internet for $3 that the border control agents and post office tries to stop saying they are all fake and counterfeit! Now just think if the biologic drugs one needs cost $100,000 and we're talking a savings without Medicare's involvement that saves $50,000 a year! That's worth the cost of a plane ride so forget the busses!! Do ya think Medicare and Medicaid would buy you airline tickets to save $50,000 a year for each patient using them, or rescind the Reimportation Act?

Nah It's simpler to take away the "donut hole" for Medicare recipients, most of whom use generics that cost $0.00 a prescription! If they don't use them they won't even know they are paying twice as much as other "socialized medicine countries! Only in America!!

Inasmuch as there is no such thing as a free lunch, perhaps Ms. Waters would like to tell us where the money to close the doughnut hole is coming from. If as she claims, it's "thanks" to Obamacare, she ought to be able to tell us the source. Perhaps some of the $716 million reduction in Medicare funding has something to do with it. And with Medicare running in the red, perhaps she can explain how the whole combination will be funded. We know that Medicare taxes will be going up, and perhaps when the deficits for Obamacare start to soar, their taxes will too.

Paul, under the ACA, $716 million was taken from payments to healthcare organizations, to force them to work more efficiently You approve of that idea, don't you?

That $716 million was used for two purposes: 1. To close the "doughnut hole" in Medicare D, an important additional benefit for Medicare beneficiaries; and 2. To extend the period of solvency of the Medicare Trust Fund. I assume that you approve of both of those uses of the money that was saved.

The liberals never think about where the money is going to come from. Medicare is way in the hole as is Soc Security because the government has used the tax funds for other things. I guess they plan to raise taxes to pay for this. With so many not working, the money will run out very fast. At some point in time they will have to take it away or get rid of us old folks!!

The reduction in Medicare funding was $716 billion, not million. You are off by three orders of magnitude. The reduction was not used to close the donut hole, it was used to create the fiction that Obamacare was not going to increase the deficit. It does not increase the period of solvency for Medicare. Twenty five percent of Medicare is funded by the imaginary trust fund, 25% from premiums and the balance from taxpayer funds. The savings reduce the taxpayer subsidy, not payments from the trust fund. (I realize this is splitting hairs, because there is no trust fund.)

In order to reduce the payments to doctors, the reimbursement rates will have to drop to Medicaid levels. Last year, 25% of physicians refused to treat Medicare patients and 40% refused to treat Medicaid patients. By dropping the reimbursement rates, more doctors will decline to treat Medicare patients. It's funny that you even attempt to make the argument that taking money away from Medicare was done to benefit retirees. (Not to mention that it's a funky transfer scheme. Extremely wealthy Medicare beneficiaries, think Warren Buffet, get the same $3000 extra benefit as the person living on a $1,000 per month pension.)

It would be like saying taking money away from food stamps is intended to benefit food stamp beneficiaries. What would happen if the government decided to reduce the maximum individual food stamp benefit from $200 per month to $150 per month, and simultaneously told grocery stores that they had to give food stamp recipients a 25% discount on all purchases? The grocery stores would decline to sell to food stamp customers because they would not be able to stay in business if they discounted 25%. One possibility is that "SNAP" grocery stores would open, with inferior quality products and prices that were 25% higher than regular grocery stores.

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